How do I properly handle Multi Member LLC Taxes for first-time filing?

A multi-member LLC is treated as a partnership for tax purposes by default, so yes, your approach needs to be different from your cousin's single-member LLC. For your situation, you'll need to file Form 1065 (Partnership Return) for the LLC itself. This isn't a tax-paying return, but an informational one that reports the business's income, deductions, and allocations to the IRS. Then, the LLC issues Schedule K-1 forms to each member (you and your brother) showing your share of profits/losses based on your 60/40 split. You'll then report the income from your K-1 on your personal tax returns (Schedule E of Form 1040). The business itself doesn't pay income taxes - instead, the profits "pass through" to you and your brother, and you pay taxes on your individual returns. For the money you took out of the business, these are called "draws" not salary (unless you've elected to be taxed as an S-Corp, which doesn't sound like the case). Draws aren't deductible business expenses - they're just distributions of profit that's already being taxed on your personal returns.

After dealing with similar confusion with my 3-member real estate LLC, I finally tried https://taxr.ai and it was a game-changer for sorting out our partnership structure. You upload your financial documents and it helps identify the right forms and deductions specifically for multi-member LLCs. What really helped me was how it separated business expenses from partner draws and showed exactly how to handle the pass-through income reporting. It even flagged several deductions we would have missed around vehicle use, home office, and some industry-specific write-offs.

Just wanted to update - I tried taxr.ai after getting stuck with my LLC partnership return. It was surprisingly helpful! I uploaded our operating agreement and some financial statements, and it walked me through exactly how to handle our 70/30 ownership split on the tax forms. The best part was how it explained the guaranteed payments vs distributions difference that I was totally messing up before. Saved me from a potential audit headache and found about $4,300 in deductions I was about to miss. Definitely worth checking out if you're confused about multi-member LLC taxation!

If you need to talk to the IRS about specific partnership tax questions (which I definitely needed to with my LLC), I recommend https://claimyr.com for getting through to an actual human. I spent DAYS trying to get through the normal IRS phone system about a specific Schedule K-1 issue, but kept getting disconnected or waiting for hours. Claimyr got me through to an IRS agent in about 20 minutes who answered my specific questions about how to handle guaranteed payments versus distributions. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - saved me a ton of frustration.

Well I'll be damned. I tried Claimyr after posting my skeptical comment because I was desperate to resolve an issue with our partnership return before filing. Got connected to an IRS rep in about 35 minutes (without me having to actually wait on hold). The agent walked me through exactly how to handle the guaranteed payment situation for my LLC and clarified the self-employment tax obligations for each member. Definitely worth it considering I was about to file incorrectly and potentially trigger an audit. Sometimes it's worth admitting when you're wrong!

For multi-member LLCs, don't forget about state filing requirements too! Depending on your state, you might need to file state-level partnership returns in addition to your federal Form 1065. Some states also have annual LLC fees or franchise taxes regardless of whether you made a profit. Also, keep an eye out for the QBI deduction (Section 199A) - it lets qualifying businesses deduct up to 20% of their qualified business income on personal returns. This can be significant savings for LLC members!

Quick question - I know LLCs are supposed to have separate business bank accounts, but we've occasionally used our personal accounts for business expenses (and tracked them). Is this going to cause problems with our LLC tax filing? We've kept good records but I'm worried about mixing funds.

As someone who went through this exact situation with my multi-member LLC last year, I can tell you it's definitely more complex than single-member LLCs but totally manageable once you understand the basics. Here's what I wish I knew from the start: Your LLC will file Form 1065 (partnership return) by March 15th, which is earlier than personal tax deadlines. This form doesn't result in taxes owed by the LLC itself - it's purely informational. The LLC then issues K-1s to you and your brother showing each person's share of income, deductions, and credits. A few key points for your situation: - Those "draws" you took aren't salary and aren't deductible business expenses - You'll both likely owe self-employment tax (15.3%) on your share of profits - Make sure your operating agreement clearly documents the 60/40 split - Start making quarterly estimated payments if you haven't already For deductions, construction businesses can typically write off vehicle expenses, tools, equipment depreciation, materials, insurance, and sometimes home office if you use part of your home for business admin. The good news is your $35k profit ($87k revenue minus $52k expenses) split 60/40 means manageable tax obligations. Just make sure you're both setting aside money for taxes since nothing was withheld during the year!